Steps For Making An Offer On A Home
It's no secret that searching for a home can be difficult. It's not uncommon for buyers to spend a few months looking at different homes until they find one that best fits their wants and needs. Upon finding the dream house, the difficult process of having an offer accepted begins and there are several things that must fall into place before starting a life in your new home.
A good offer can increase your chances of the seller accepting yours over other potential buyers. But how do you make the kind of offer that will get you your dream home? Ramsey Solutions explains that after you make an offer, sellers can respond in a number of ways: they can accept the offer, pose a counteroffer, or decline. Of course, you ideally want the sellers to accept your offer the first time. But a counteroffer or declined offer doesn't necessarily mean you won't get the house, and there are certain steps you can take to improve your chances.
Being preapproved will make things easier
Before you start looking for your home, get preapproved. Preapproval is when a bank or lender confirms your credit history and declares you are a suitable candidate for a mortgage. Being preapproved can make your initial offer look much more attractive to a seller and give you an edge over other potential buyers. According to Rocket Mortgage, the preapproval process involves providing pay stubs to prove your income, bank statements, and a credit check. After preapproval, you'll know what loans you can apply for, how much money you can borrow, and your potential interest rate.
Once you put in an offer for a home, you'll still need to get full approval, as preapproval doesn't guarantee the funds. However, preapproval allows you to make an offer as soon as you find a home you love. Also, your offer will look good to sellers and their agents when you have proper documentation.
Protect yourself with contingencies
Contingencies give you protection in a real estate transaction. Adding them to your offer will allow you back out of the transaction without losing your deposit or dealing with legal issues. According to Home Buyer, there are five kinds of contingencies: home inspection, appraisal, financing, home sale, and title. Adding a contingency of a home inspection means a third party will inspect the property to search for serious issues and allow you to renegotiate the price or remove yourself from the deal. Appraisals are similar in that a third party determines the home value, which allows you to renegotiate based upon their findings.
If a mortgage loan doesn't come through, a financing contingency will allow you to exit the transaction. You can make purchasing the new home dependent on your current home selling with a home sale contingency. Similarly, with a title contingency, if there are issues with the property title, this gives you recourse to leave the deal. Since contingencies are meant to protect the buyer, they may scare some sellers away. If there is a risk of the deal falling through then some sellers may not be willing to take that chance. Waiving contingencies can make your offer more competitive, but it's important to protect your interest as well, so speak with your real estate agent to make the best decision.
Make an offer sellers can't refuse
You're preapproved, and you've decided what contingencies you're willing to waive; now it's time to write up an offer that the seller can't refuse. But how can you make your offer more appealing than any other potential sellers? First, you can time your offer well. In a competitive market, you'll want to get your offer in quickly. As soon as you see a house you like, be prepared to have your agent write upland submit an offer. If a house has been sitting on the market for a while, you have a little flexibility. But it's still a good idea to send an offer in as soon as you can.
Moreover, if you have the option to submit a cash offer, then do so. Paying in cash means you won't have to have a mortgage and that makes the sale more efficient and appealing to the seller, says Bank Rate. You may also want to consider writing a personal letter to the sellers. Include what you love about the home, how you see yourself and your family living there, and anything you're excited about. Be genuine, as a personal letter can set you apart and could be a deciding factor in which offer a seller accepts.
What should be included in your offer
In many cases, your real estate agent will write up your offer. But if you're representing yourself or purchasing the home without an agent, then you'll be writing the offer letter. Whoever ends up writing the offer, it's important to know what's included, and you should review it before it's submitted. Start with the property address, the buyer's name, the seller's name, and the offer price, suggests Zillow. From there, you may want to mention an earnest money amount, which is a good faith deposit of about 1% to 3% of the purchasing price.
After that, list any contingencies to the purchase or any credits you may request. Identify the title company or closing attorney if you have one. Be sure to include an offer expiration date to encourage the seller to act quickly, which will also allow you to look at other homes if the seller takes too long to respond, and finish with a proposed closing date.
Once the seller responds
When the seller responds, the home buying process isn't over quite yet. It depends on how they respond: if the sellers accept the offer, you'll move forward with the home buying process. But if the seller counters or declines, you may want to come back with another offer. Although a declined offer can be disappointing, if you have room in your budget, you can write a more attractive offer with a higher price. A counter offer usually means that the seller didn't like how the offer was written up, says Mint Life. It could be an issue with contingencies, financing, or the offer amount. If a seller presents you with a counteroffer, you have more options on how to respond.
You can accept the offer and move forward with the buying process, decline the offer and move on to a new house, or counter again and renegotiate. Negotiating can be difficult and involves a lot of back and forth as you and the seller come to an agreement. If you do come to an agreement, then congratulations, you've just bought a house!